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Archive for the Poverty Category

The US provides substantial food aid at times of crisis to many countries around the world. According to current policy, the food is purchased from US farmers. This has the advantage of helping the US farmers, many of whom are struggling to make a decent living, like farmers in many other developed countries. However, it also has significant disadvantages, including the logistical challenge of transporting the food aid and the adverse effects of imported food aid on local markets in recipient countries.

Unfortunately, when food aid is imported into a recipient country and distributed free of charge, local farmers are no longer able to sell their crops, because they are unable to compete with free. If the food aid continues for long enough, there will be a disincentive for local farmers to plant the next crop because they know or suspect that they will be unable to sell it, and accordingly the delivery of food aid can actually cause long-term food insecurity, as has happened in Ethiopia.

According to a recent New York Times article, the Obama Administration is seeking to change the food aid policy to give preference to buying food in developing countries, rather than buying it from US farmers and shipping it to the recipients. The change should enable the US to provide significantly more food aid at lower cost. The change in policy is being opposed by organisations with US farming and shipping interests, who stand to lose hundreds of jobs.

Unfortunately there is usually a gap between good intentions and effective poverty relief interventions. People who are trapped in poverty are often there because they live in a system which operates to keep them poor. The high costs of insecurity, lawlessness, and exploitation may outweigh any savings that a person might otherwise have made, so that the person remains poor no matter how hard he or she works.

As a result of experiencing the failure of direct poverty interventions, most donors seek to influence the outcome by requiring their gifts to be used in a particular way, such as in skills training, or microfinance loans. However, most donors do not follow up their donations sufficiently to be sure about the degree to which their interventions have had a positive outcome. Usually the outcome is far less positive than expected.

An organisation called GiveDirectly works on the assumption that, although the simplest form of assistance, giving cash, has many known drawbacks, it is actually more helpful and efficient than most of the other types of intervention. GiveDirectly monitors its results using randomised control trials, and its model presents a challenge to other types of poverty relief: if an intervention is not at least as successful as giving cash, how can it be justified?

Rwanda, Nepal and Bangladesh are the most rapidly improving countries as far as poverty reduction is concerned, according to the Global Multidimensional Poverty Index published by Oxford University’s Poverty and Human Development Initiative. The Index measures “multidimensional” poverty, rather than the more normal income poverty. The percentage of people in Rwanda who were multidimensionally poor reduced by 3.4 percentage points per year.

Tanzania has also been identified as experiencing some success in reducing poverty, although at a less impressive rate. The percentage of Tanzanians identified as multidimensionally poor reduced by 2.7 percentage points per year. On the other hand, Kenya, while it has experienced economic growth over the past decade, has made very limited progress in reducing the multidimensional poverty rate.

In absolute terms, Kenya is still doing better than its neighbours. The percentage of Kenyans identified as being multidimensionally poor is 47.8 percent, compared with figures of 69.0 percent for Rwanda, 69.9 percent for Uganda, and 65.6 percent for Tanzania. In Somalia, by way of contrast, some 81.2 percent of people are classified as multidimensionally poor.

If people living in poor countries are to work their way out of poverty, they need to have the opportunity to conduct business at a reasonable cost. Unfortunately, the cost of doing business in poor countries is often higher than in developed countries, making life harder for the poor. Deloitte tax partner Nikhil Hira explained some of the bureaucratic requirements in Kenya which increase the cost of doing business, in a recent article in The East African.

The publication of legislation is often delayed, so that business owners have very little notice of surprising new compliance requirements. For example, the publication of recent finance legislation was delayed, and it contained the surprising and expensive requirement that all Electronic Tax Register machines be made GPRS-enabled. The new requirement will probably help to reduce tax evasion, but in the meantime will impose considerable burdens on businesses.

According to Hira, a typical company is required to make more than 65 different payments to the Kenyan revenue authority each year. It takes almost 3 months to incorporate a company in Kenya, whereas in Rwanda it takes just two days. Hira also says that the government tends to introduce new types of taxes without thinking through their likely practicality. The new excise duty on financial institution charges and extractive industry withholding tax are examples of this.

The 15-year period of the Millennium Development Goals is due to expire in two years’ time. Good progress has been made in respect of some goals, while progress in some countries in respect of other goals has been disappointing. So, what should the main plan be for global development over the next 15 years, and should new goals be set to update or replace the Millennium Development Goals?

An important preliminary question might be: who gets to set the goals? Apparently, the world’s poor were not consulted in the formulation of the Millennium Development Goals. Subsequent research reveals that the primary concern for people in the developing world is household income, including ensuring a reliable income, being able to pay for food, education and healthcare, and being able to start a small business.

The United Nations has convened a High Level Panel to recommend a new set of development goals. The Panel met in Liberia last month, and is due to meet in Indonesia this month. The ONE campaign is seeking to give the poor a voice, and has set up a free SMS platform in South Africa which enables Africans to express their views.

One of the problems associated with aid is that it often tends to have the opposite effect to what the donor intended. The purpose of aid is to help make life better for people who are living in poverty. However, to those who receive aid from the donors, aid looks like free money. No-one on the receiving side had to work for it or save up for it; it came from unknown people who appear to be incomparably wealthy and who will not miss it, so it seems as if no-one will be harmed if a small amount is embezzled.

Those who deal with dispensing aid on the donor side are at first shocked when some of the money is embezzled or is misapplied or is not properly accounted for. But once it becomes apparent that this is the norm rather than an isolated exception, donor-dispensers tend to settle for loss minimisation rather than loss prevention. It is very embarrassing to have to report embezzlement back in the donor country, so they turn a blind eye, and become complicit in the theft of funds.

Little by little, rather than curing poverty, aid tends to cause corruption, which then tends to become a contributing factor in the perpetuation of poverty. Emboldened by funds stolen from aid donors without consequence, corrupt administrators look for other ways to help themselves, inevitably at the cost of the poor, whom they are supposed to be serving.

There have been some gains and some losses in Africa in the past year, according to the Freedom in the World 2013 report issued by Freedom House. Each country is given a rating of between 1 and 7 for Political Rights and Civil Liberties, with 1 being the most free and 7 being the least free. Libya has progressed from “Not Free” to “Partly Free” in the wake of Gaddafi’s removal from power, while Mali has regressed to “Not Free” as a result of the military coup and Islamist insurgency.

In East Africa, the ratings of Kenya, Uganda and Rwanda all declined during the year. Kenya is now rated 4 for both political rights and civil liberties, with the decline attributable to ethnic clashes in the Tana River Delta and the sporadic incidents of terrorist activity. Uganda is rated 5 for political rights and 4 for civil liberties, with suppression of opposition protests being a major factor during the year. Rwanda is rated “Not Free” with 6 for both political rights and civil liberties. Tanzania is rated 3 for both political rights and civil liberties.

Altogether, 90 countries in the world are rated Free, 58 countries are rated Partly Free, and 47 countries are rated Not Free. In sub-Saharan Africa, 36% of the population lives in countries rated as Not Free, 51% lives in countries rated Partly Free, and only 13% lives in countries rated as Free. This compares with Western Europe, where 85% of the population lives in countries rated as Free.

In the past decade the proportion of children attending school has increased in many poor countries. Unfortunately, however, the statistics do not show the quality of education being provided to the children. In many cases, poor children who attend school get provided with a very poor quality of education, as indicated by the results of the recent National Form 4 (Year 10) examinations in Tanzania, which had a 61% failure rate.

Out of 397,126 students who sat for the exams, 240,903 failed. Over the past several years, examination results have been getting worse rather than better, although this may be at least partly due to better prevention of cheating. The best results were obtained by students from private schools. Only students who pass the Form 4 examinations are eligible to continue their secondary education for two more years.

The poor results reflect a range of problems with education in Tanzania. Schools are very poorly equipped and lack the basic books required for the courses being taught. There is a severe shortage of teachers relative to the number of pupils. Teachers are underpaid, and morale is low. Members of the government are perceived as uncaring because their children attend prestigious schools overseas.

The poor get ripped off, mistreated and underserved by their government, and yet they rarely complain, according to Marcelo Giugale in a recent article in the Daily Nation. Why is it so? In the past, conventional wisdom blamed the passivity of the poor on lack of political freedom. Current conventional wisdom blames it on lack of information. However, tests show that the poor remain mostly passive even when they are well informed about the poor quality of the services they are receiving.

In rural Kenya, there has been no significant increase in parental involvement with the local school after parents were shown how their children’s results in standardised tests were appallingly low. Information alone is not sufficient for people to be moved to action. Other factors inhibit concerted action, including:

Culture: It may not be acceptable within the culture to confront the provider of services over poor performance;

Leadership and organisation: People have to be organised to take concerted action, and someone has to be willing to show leadership;

Patronage: People may be unwilling to confront an authority who has been generous in other ways;

Preoccupation: When finding food for today is your primary concern, the poor quality of services provided by the government is a secondary concern which you do not have the energy to address.

For many of the world’s poor, most pharmaceuticals required to treat common illnesses are unaffordable. However, when someone scrapes together enough money to buy essential drugs, an even more insidious problem can arise: many of the pharmaceuticals sold in poor countries are not genuine, and can even have a harmful effect. The extent of the problem is illustrated by the results of a recent survey.

The survey, published yesterday in the International Journal of Tuberculosis and Lung Disease, related to the drugs isoniazid and rifampicin, which are used in the treatment of tuberculosis. People living in each of 19 different cities were instructed to purchase these pharmaceuticals from private pharmacies, and the purchased drugs were analysed. Some of the pills which failed the tests came from legitimate manufacturers but were poorly made or had corroded in transit. Others were counterfeits, made to look like the real thing, but without beneficial effect.

The African cities included in the survey were Luanda, Lubumbashi, Cairo, Addis Ababa, Accra, Nairobi, Lagos, Kigali, Dar-es-Salaam, Kampala and Lusaka. Some 16.6 percent of the drugs purchased in these African cities failed the tests, compared with an average 3.9 percent failure rate in Sao Paulo, Beijing, Bangkok, Moscow and Istanbul.